Correlation Between Okta and ZOZO

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Can any of the company-specific risk be diversified away by investing in both Okta and ZOZO at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Okta and ZOZO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Okta Inc and ZOZO Inc, you can compare the effects of market volatilities on Okta and ZOZO and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Okta with a short position of ZOZO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Okta and ZOZO.

Diversification Opportunities for Okta and ZOZO

-0.02
  Correlation Coefficient

Good diversification

The 3 months correlation between Okta and ZOZO is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Okta Inc and ZOZO Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZOZO Inc and Okta is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Okta Inc are associated (or correlated) with ZOZO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZOZO Inc has no effect on the direction of Okta i.e., Okta and ZOZO go up and down completely randomly.

Pair Corralation between Okta and ZOZO

Given the investment horizon of 90 days Okta Inc is expected to generate 0.1 times more return on investment than ZOZO. However, Okta Inc is 9.69 times less risky than ZOZO. It trades about 0.03 of its potential returns per unit of risk. ZOZO Inc is currently generating about -0.13 per unit of risk. If you would invest  6,442  in Okta Inc on August 30, 2024 and sell it today you would earn a total of  1,200  from holding Okta Inc or generate 18.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy42.83%
ValuesDaily Returns

Okta Inc  vs.  ZOZO Inc

 Performance 
       Timeline  
Okta Inc 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Okta Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Okta is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
ZOZO Inc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
OK
Over the last 90 days ZOZO Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak essential indicators, ZOZO reported solid returns over the last few months and may actually be approaching a breakup point.

Okta and ZOZO Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Okta and ZOZO

The main advantage of trading using opposite Okta and ZOZO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Okta position performs unexpectedly, ZOZO can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ZOZO will offset losses from the drop in ZOZO's long position.
The idea behind Okta Inc and ZOZO Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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